Question

A machine with a cost of $64,100.00 has an estimated residual value of $4,140.00 and an estimated life of 5 years or 19,602 hours. What is the amount of depreciation for the second full year, using the double declining-balance method?

Answer 1

Beginning book value (cost ) of machine = $64,100

Useful life = 5 years

Salvage value = $4,140

Depreciable value of the machine = 64,100 - 4,140 = 59,960

Annual depreciation rate = 100% /5 years = 20%

Depreciation for Year 1 under Double Declining balance Method = Book value * Depreciation rate * 2

= 64,100 * (20 * 2)%

= 64,100 * 40%

= $25,640

Year 1 ending Book value = 64,100 - 25,640 = 38,460

Depreciation for Year 2 under Double Declining balance Method = Book value * Depreciation rate * 2

= 38,460 * (20 * 2)%

= 38,460 * 40%

= $15,384

Amount of depreciation for the second full year, using the double declining-balance method = $15,384